Last minute shoppers carry bags the day before Christmas in New York, Monday, Dec. 24, 2007. (AP Photo/Seth Wenig)

Holiday shopping (AP Photo/Seth Wenig)

PATERSON, N.J. (CBS 2) — New Jersey residents who are looking to save some money on their holiday shopping – like paying only half of the sales tax on items, or no sales tax at all – need look no further than Paterson.

Paterson, New Jersey is the hometown of comedian Lou Costello, and it’s where you’ll find the Great Falls. It’s also home to another hidden secret, and it’s attracting holiday shoppers looking to save money.

“They are able to sell products at 3.5 percent sales tax, which is a huge benefit to our customers as opposed to the state’s seven percent tax,” Sheri Ferreira, of the Paterson Special Improvement District, said.

Paterson, and dozens of other towns like West New York and Union City, are in urban enterprise zones, which allows them to charge the 3.5 percent sales tax.

In Paterson, though, there’s something different – the new Center City Mall, with underground parking and a posh steakhouse. The mall is hoping to attract shoppers from other nearby towns.

“I have been living in Paterson all my entire life, and this is the first time I actually see a mall,” resident Linda Wimberty said.

Another plus in Paterson is that there’s no sales tax on clothing in New Jersey, but it’s the cut in sales tax that’s drawing consumers to the big-ticket items.

“In my jewelry store, we have 45 to 50 percent off on all pieces,” Khal Hamade, of Nimadika Diamonds, said.

With the special sales tax and discount, customers would pay just over $1,000 for a $2,200 necklace.

On the other side of Paterson, electronics and appliances – expensive items where a halved sales tax can really make a difference – are flying off the shelves.

From baby furniture to perfumes, shoppers in Paterson were finding just about everything they needed at bargain prices, and many hope it could turn the overlooked city into a shopping destination.

Some of the other urban enterprise zones in New Jersey include Bayonne, Newark and Orange.